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Concept
Chicago school of economics
Summary
The Chicago school of economics is a neoclassical school of economic thought associated with the work of the faculty at the University of Chicago, some of whom have constructed and popularized its principles. Milton Friedman and George Stigler are considered the leading scholars of the Chicago school.
Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations.
The freshwater–saltwater distinction is largely antiquated today, as the two traditions have heavily incorporated ideas from each other. Specifically, new Keynesian economics was developed as a response to new classical economics, electing to incorporate the insight of rational expectations without giving up the traditional Keynesian focus on imperfect competition and sticky wages.
Chicago economists have also left their intellectual influence in other fields, notably in pioneering public choice theory and law and economics, which have led to revolutionary changes in the study of political science and law. Other economists affiliated with Chicago have made their impact in fields as diverse as social economics and economic history.
As of 2018, the University of Chicago Economics department, considered one of the world's foremost economics departments, has been awarded 14 Nobel Memorial Prize in Economic Sciences—more than any other university—and has been awarded six John Bates Clark Medals. Not all members of the department belong to the Chicago school of economics, which is a school of thought rather than an organization.
The term was coined in the 1950s to refer to economists teaching in the Economics Department at the University of Chicago, and closely related academic areas at the university such as the Booth School of Business, Harris School of Public Policy and the Law School. In the context of macroeconomics, it is connected to the freshwater school of macroeconomics, in contrast to the saltwater school based in coastal universities (notably Harvard, Yale, Penn, UC Berkeley, and UCLA).
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